Halyard’s Weekly Wrap – 11/12/21

Wednesday November 10th provided a proverbial “gut punch” to the capital markets. The day started with the inflation report for October that was way above expectations and was capped with a 30-year bond auction that was an absolute disaster.  Year over year CPI came in at 6.2% versus the 5.4% registered last month.  Fed Chairman Powell continues to believe that the uptick in inflation is going to pass but it’s not happening, and people are not happy about it.  In the latest release, energy had an outsized effect on the result, climbing 4.8% month-over-month, but that represents a little over 7% of the total.

October 2021 – Monthly Commentary

Wednesday November 10th provided a proverbial “gut punch” to the capital markets. The day started with the inflation report for October that was way above expectations and was capped with a 30-year bond auction that was an absolute disaster.  Year-over-year CPI came in at 6.2% versus the 5.4% registered last month.  Fed Chairman Powell continues to believe that the uptick in inflation is going to pass but it’s not happening, and people are not happy about it. 

Halyard’s Weekly Wrap – 11/05/21

This was supposed to be the week that the Fed, the Bank of England and, to a lesser extent, the ECB eased off the accelerator of monetary policy. As communicated for several months now, Chairman Powell announced that the Fed would begin to taper open market purchases in the amount of $15 billion per month. At the post-meeting press conference, which is typically a non-controversial “softball” affair, the tone of the Q&A got a bit confrontational. Powell reiterated repeatedly that the Fed was in no way prepared to raise the Fed Funds rate. After driving home that point, the line of questioning turned to the trading scandal that cost Fed Presidents Kaplan and Rosengren their jobs. We had thought the matter had been put to bed but apparently the media didn’t get the memo. Powell was put through the rhetorical wringer with questions like how he’d restore the confidence of the American people and if he felt the new policy went far enough. He got through those questions with an even tone, but when asked if the trading scandal would hurt his chances for Biden to renominate him and for Congress to approve his approve his nomination, there was decidedly a bit of annoyance in his “I’m not going to answer that question” response. Otherwise, investors were delighted that a rate hike is not contemplated anytime soon, as witnessed by the simultaneous rally in stocks and bonds to close out the week.

Halyard’s Weekly Wrap – 10/29/21

The dour mood bond buyers have been in since early August reversed itself in a bout of short covering this week, with an especially sharp move on Wednesday.  On that day alone, the 10-year Treasury note plunged 9 basis points.  The fall in yield occurred despite mostly better than expected economic data, and was highlighted by an outstanding 5-year note auction.  Bucking the trend of weaker, tailing auctions, the $61 billion 5-year note cleared 2.5 basis points below the at-auction yield.  Moreover, Primary Dealers bought 17.9% of the auctioned amount, the third lowest result since 2004.  The momentum was enough to carry the 30-year note below 2.00% for the first time since early September.  That’s not to imply that we’ve turned bullish on the bond market.  To the contrary, we think the price action this week was simply supply and demand coming back into balance after several bearish months.